Philippine urbanization

in the medium term

Cayetano Paderanga, Jr.

Professor, UP School of Economics

03 February 2010
 Flow of the presentation
 Overview
 Initial status & recommendations
 Diminishing role of main city
 Main economic policies during the period
 Macroeconomic policies
 Spatial policies

 Current trends
 Integrating markets
 Rising trade
 Rising financial integration
 Current global crisis

 Initial lessons & recommendations

Urban development
since the 1970s
 Back in the 1970s

 Philippine urbanization & primacy

(1975)

 Dominance of Metro Manila

 Uneven regional development

 Overview
Philippine urbanization
During the 1970s
 Characterized by conscious public effort to decongest
Metro Manila
 Creation of separate economic known as “economic processing
zones” in NCR’s adjacent areas  firmed up the position of
Central Luzon & Southern Tagalog as part of RP’s Central
Industrial Regions

 Gradual rise of broad regional centers like Metro Cebu

(Visayas region) & Metro Davao (Mindanao region)

 By 1975, total population rose to 42.01-m

 14.9-m (35.6%) in urban areas
 27.0-m (64.4%) in rural areas
 Overview
Philippine urbanization

Comparing oldest & latest census data on

urban-rural population:

 In 1903, total population reached 7.63-m

 1.02-m (13.4%) belonged in the urban areas
 6.06-m (86.5%) found in the rural areas

 By 2000, this increased to 76.50-m

 36.7-m (48.0%) in urban areas
 39.7-m (51.98%) in rural areas
 Overview
Philippine urbanization
Compound Annual Growth Rates for Total, Urban, & Rural Population

Source: 2007 UN Urbanization Prospects

• Since the post-war period, the growth rate for urban population has
exceeded those of total & urban population
 Overview
Philippine urbanization
Distribution of Total Population, 1950- 2010*

Source: 2007 UN World Population Prospects

• Marked shift in population towards the urban areas

 Overview
Dominance of Metro Manila
Metro Manila (1975)
 Population: 4.97- m Filipinos (33.5% of urban pop’n; 11.9%
total pop’n)
 Population density: 7,814.5 persons/sq.km.
 Number of Manufacturing Establishments: 15,760
 Host to RP’s primary gateway both by AIR & WATER &
primary Oil Depot

On the other hand, combined numbers for 2nd- ranked

& 3rd-ranked cities--Metro Cebu &
Davao, respectively, still paled in comparison.
 Overview
Other regional centers
Metro Cebu (1975)
 Population: 415,000 Filipinos (2.8% of urban pop’n; 1.0% total
pop’n)
 Population density: 1,470.4 persons/sq.km.
 Number of Manufacturing Establishments: 2,840
 Host to alternate international airport & primary seaport

Metro Davao (1975)

 Population: 488,000 Filipinos (3.3% of urban pop’n; 1.2% total
pop’n)
 Population density: 219 persons/sq.km.
 Number of Manufacturing Establishments: 2,815
 Host to a tertiary airport & primary seaport
 Urban Population in Major Cities as % of Urban Population
40

35

30
as % of urban population

25

20

15

10
Cebu Davao Manila
5

0
1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010
Source: 2007 UN Urbanization Prospects

• NCR’s share in total urban population peaked at 1975—this has declined following the
dispersion of population to nearby areas & conversion of municipalities into charter
cities.
 Urban Population in Major Cities as % of Total Population

Source: 2007 UN Urbanization Prospects

 Overview
Dominance of Metro Manila

3 Factors that led to primacy of Metro Manila:

 Socio-economic forces
 The US colonial rule (primary product export-led growth)
 Development policies in post-war period
 Import substitution period (1946- 1960)
 Decline in agricultural regions
 Start of population & economic resources shift to Manila
 Decontrol & devaluation period (1960- 1968)
 Development of adjacent urban centers. Driven by 2 factors
 Agglomeration economies & spillover effects
 Rise of Central Industrial Region
 Regional awareness period (1970- present)
 Overview
Dominance of Metro Manila

 Natural endowments
 Excellent ports, well-developed (relative)
infrastructure

 Historical forces
 Administrative & political center since Spanish Era
 Overview
Uneven regional development

Annual Growth for Selected Regions, 1975- 2008

Source: NSCB

• Except for selected periods, the growth rates by NCR & S. Tagalog has exceeded
national GDP. This means it also bears the brunt of an economic contraction as
what happened in the 1980-1985 period.
• Only C. Luzon managed to record unbroken expansion since 1975.
 Overview
Uneven regional development

Some Observations:
 The share of regions belonging to the Central Industrial
continue to rise. In the case of Central Luzon for example, this
rose to 60.51% in 2000 from only 29.22% in 1975.

 On the other hand, frontier regions like the ARMM continue to

have slow rate of urbanization. From 18.38% share of urban
population in 1975, this dropped to 11.76% in 1980 before
gradually rising to 21.25% in 2000.
 Overview
Uneven regional development

Compound Annual Growth Rate of Population in Urban Areas

Source: NSO

• Since 1975, the rate of urbanization in the NCR has slowed down with C.
Luzon & S. Tagalog regions consistently surpassing national average.
• Since 1990, rate of urbanization in other regions has been on a downtrend.
 Urban Rural Share of Population Per Region, 1975- 2000

Source: Census of the Philippines

 Diminishing role of main city

 In the 1970s, there was greater awareness now

that Metro Manila and its nearby urban centers
were growing even as the agricultural & frontier
areas were stagnating. Thus, there was conscious
public attempt to disperse industries to countryside

 This was made more aware by the obvious

congestion of Metro Manila & consequent rise of
urban problems, plus the government’s avowed aim
of making Metro Manila a national & international
center in the world map
 Overview
Main economic policies, 1970s- onwards
Macroeconomic Policies
 Gradual dismantling of exchange controls & de facto devaluation
of the peso (ideally encourage export industries)
 However, tariff structure & tax incentives remain in favor of import-
substitution industries
 Exacerbated by frequent minimum wage adjustments

Spatial Policies
 Investment & Export Promotion Policies
 Creation of Board of Investments- designated area w/c enjoyed generous fiscal
incentives

 Agricultural Policies
 Masagana 99 rice program

 50-km radius ban starting December 1973

 Integrated Area Development

 Others
 national infrastructure building program, e.g. Phil.-Japan highway, rural
electrification program
 Overview
Main economic policies, 1970s- onwards

 These programs only succeeded in encouraging

firms to locate near Metro Manila, hence the
current big share of Calabarzon & C. Luzon in
national output.

***and NOT THE DISPERSION OF INDUSTRY IN

THE FAR-FLUNG REGIONS.
Current trends
 Current trends
Metro Manila
 Metro Manila (2000)
 Population: 9.93- m Filipinos (27.03% of urban pop’n;
12.9% total pop’n)
 Population density: 15,617 persons/sq.km.
 Number of Manufacturing Establishments: 21,861
 Host to RP’s primary gateway both by AIR & WATER
& primary Oil Depot
 Current Trends
Actual contribution to national output

Actual Share in Gross Regional Domestic Product, 1975- 2008

Source: NSO
 Current trends
Distribution of national output
Gross Regional Domestic Product, Selected Years

Source: NSCB

• The combined output of NCR, Southern Tagalog & Central Luzon regions accounted for
more than 50% of national output since 1975.
 Current trends
Distribution of manufacturing output
Regional Share in Manufacturing Output, 1975- 2008

Source: NSO

• NCR’s share of manufacturing output was on downtrend from 1975- 2000, reaching
40% that year. Since then it has been on upward trend.
 Distribution of manufacturing establishments

Source: NSO

 NCR, S. Tagalog, C. Visayas, and Davao regions have shown

increased share of manufacturing establishments
 Outside of these regions, the concentration of manufacturing
establishments has diminished after periods of high concentration.
 Distribution of small -
Large manufacturing establishments large manufacturing
establishments
 Large manufacturing
establishments concentrate mostly
in S. Tagalog and NCR
 This also applies for medium and
small manufacturing
establishments
Medium manufacturing establishments Small manufacturing establishments

Source: NSO
 Distribution of micro manufacturing establishments

Source: NSO

 Meanwhile, micro-sized manufacturing establishments

remain to be concentrated in areas outside of the
regions of NCR, S. Tagalog, C. Visayas, and Davao.
 Current trends
Impact of the global crisis

 Impacts of the
global financial
crisis is seen in the
industry sector,
particularly
manufacturing and
related sub-
sectors, due to
weak global
demand
 Top Ten Cities/ Municipalities By Urban
Population: 2000

Source: National Statistics Office

• Excluding Metro Manila w/c has a population of 9.93-M for the same year,
Cebu City and Davao City are the largest in terms of the size of the urban
population
Initial lessons &
recommendations
 Initial lessons
 Weberian location factors help explain spatial concentration of
manufacturing in Metro Manila and later on in Calabarzon &
Central Luzon
 Benefits from spillover effects & agglomeration economies
tend to be bigger factors for firms than various fiscal
incentives. This also carries potential of further increasing
output with less additional costs (if externalities are
minimized)
 Change in macroeconomic and allied policies have started to
reduce primacy and increase growth in some secondary cities
 Globalization of trade and integration of markets can heighten
or lighten primacy depending on economic policies
 Recommendations
 Encourage the further development of other regional
centers and other secondary cities, e.g. Cebu & Davao
to provide alternative location for firms found in the
Central Industrial regions
 Government should invest in both soft & hard
infrastructure to facilitate dispersion of firms in
countryside
 Governments needs to raise investments in rural
areas to reduce the demand pull of better employment
opportunities, social services in the urban centers
 Recommendations
 Following three-dimensional approach
A. Incipient areas: still largely agricultural, low density
 Build density and expand markets through:
 Linkage between barangays and towns
 Facilitate rural-urban transformation to exploit incipient agglomeration
economies
B. Intermediate areas: key secondary cities
 Organize administration for effective urban management &
build internal infrastructure to reduce externalities
 Either enlarge central city/town or fuse adjacent towns
 Infrastructure to ease congestion & promote internal efficiency
 Maintain basic urban services to contain diseconomies
 Investment requirements may dictate phasing development among key
secondary cities
 Recommendations
C. Advanced areas
 Maintain “livability” in large metropolis (to contain diseconomies
while exploiting urbanization economies)
 Infrastructure and policies to maintain and heighten linkages with
secondary cities
 Infrastructure to control congestion at very high densities
 Integrate slums into city
Philippine
urbanization in the
medium term
Cayetano Paderanga, Jr.
Professor, UP School of Economics
3 February 2010
What are urbanized areas?*
 All cities & municipalities having a pop’n density of at least 1000
persons per square kilometer

 Poblaciones or central districts of municipalities and cities w/c have a

population density of at least 500 kilometers per sq km

 Poblaciones or central districts (not included in the above), regardless

of the population size w/c have the ff:
 Street pattern, i.e., network of streets in either parallel or right angle orientation;
 At least six establishments (comm’l, manufacturing, recreational, and/or personal
services); &
 At least three of the ff:
 A town hall, church, or chapel with religious services at once
 A public plaza, park, or cemetery
 A market place or building where trading activities are carried on at least once a week;
 A public building like school, hospital, puericulture or health center and library

 Barangays having at least 1000 inhabitants w/c meet the preconditions

set forth in 3 above, & where the occupation of the inhabitants is
predominantly non farming or non fishing.

*Same concepts used in the 1970, 1975, 1980 and 1990 censuses
 Metro Cebu Metro Davao
 Cebu City
 Davao City
 Carcar City
 Danao City  Digos City
 Mandaue City
 Lapu-lapu City
 Tagum City
 Talisay City  Panabo City
 Naga City
 Compostela  Island Garden City
 Consolacion of Samal
 Cordova
 Liloan  Carmen
 Minglanilla  Sta. Cruz
 San Fernando